The California Department of Insurance (CDI) did not calculate the financial impact of a proposed 17% interim emergency rate increase for homeowners’ insurance requested by State Farm General, according to department chief actuary Tina Shaw.
Shaw’s remarks came as an administrative hearing on the rate proposal concluded on April 10, according to a report by Best Wire.
Shaw said the insurer’s financial condition was already under strain when it submitted broader property rate filings in June 2024. Since then, the situation has worsened, particularly following the January wildfires in Los Angeles, she said.
She also stated that raising property rates alone is unlikely to resolve the company's financial issues. State Farm General writes several other lines of business, and Shaw said rate changes across those areas may also be necessary.
Last year, State Farm filed for property/casualty rate increases of 30% to 55%, citing concerns about maintaining solvency. The proposed hikes include a 30% increase for non-tenant homeowners, 55% for condominium coverage, 41.6% for tenant policies, 53.6% for personal liability umbrellas, 38% for rental property damage, and 55% for business owner policies, according to the report.
The 17% interim rate request, which was revised from an initial 21.8%, is now under consideration by Administrative Law Judge Karl-Fredric Seligman, who will issue a recommendation to Insurance Commissioner Ricardo Lara. As part of discussions with regulators, State Farm agreed to pause policy non-renewals through the end of 2025. Its parent company also committed to a $400 million capital contribution, the report said.
Consumer Watchdog, which intervened in the hearing, questioned whether the insurer’s financial condition is a valid basis for the rate request under state law. Legal director Will Pletcher said the company had bypassed regulatory safeguards, and estimated the interim rate could add about $50 per month to some policies.
Shaw said any interim rate increases approved would be subject to review. If later deemed excessive, policyholders would receive refunds with interest.
A full hearing on the long-term rate filings is expected to include first-quarter data, according to the report.
On April 6, State Farm reported more than $2.75 billion in payouts on nearly 12,400 fire-related claims. The company previously estimated $7.6 billion in direct wildfire losses, with net retained losses of approximately $212 million after reinsurance. Its surplus could decline to $604 million, from $1.04 billion at the end of 2024.
